Colorado's PV Industry Threatened by Xcel Energy

Colorado, USA --
Last week Xcel Energy, Colorado's largest investor-owned utility (IOU) with over 90% of the state's PV market, announced catastrophic changes to its "Solar*Rewards" customer-sited PV incentive program.

The immediate result is that sales activity in Xcel’s customer-sited PV market has come to a grinding halt. Xcel Energy’s Solar*Rewards program will not accept new project applications until the Colorado Public Utilities Commission (CPUC) addresses the issue. Unfortunately, Xcel’s actions parallel those taken by Colorado’s other IOU and second largest utility, Black Hills Energy, which took similar actions last October that have effectively killed its portion of the state’s PV market. In the meantime, until this issue is resolved by the CPUC, local solar companies only have previously-approved projects, if any, to sustain them while the future of Colorado’s solar industry and customer-sited PV market hangs in the balance.

Prior to the unexpected announcement, incentive levels for the Xcel Energy Solar*Rewards program had been set according to capacity-based tiers that Xcel published – and updated daily – on its website (see snapshot below -- more info in sidebar at end of the article). Modeled after the California Solar Initiative (CSI), the capacity-based tiers were established in 2009 with the intention of providing a road map of how the solar incentives would decline over time, thereby providing critically important transparency and visibility.

Solar companies used this information to plan their business operations and communicate to potential solar customers. Last Wednesday, Xcel Energy detoured from this road map with their unexpected, unilateral announcement. It was equivalent to immediately skipping over the remaining five steps that collectively represented over 36 MW in just one of the four Solar*Rewards incentive categories (first table in sidebar below).

Why is Xcel Energy doing this? In its press release, it claims that, “The changes are prompted by the decline in solar panel costs and increasing subsidization from government programs. Together, these developments have reduced the level of Xcel Energy incentives needed to support customer participation in Solar*Rewards.” Indeed, solar panel costs have declined over 50% in the past 2-3 years, but it’s unclear what government programs Xcel is referring to that are increasing their subsidization.

Either way, the decreasing cost of installing solar has allowed the incentive levels to be reduced proportionately over the same time period, in keeping with the program’s original outline. As future cost reductions were realized, the capacity-based tiers should have allowed for a smooth transition, allowing demand and cost reductions to drive the decrease in incentives. Demand would only be sustained if costs continued to decline – that’s part of the beauty of such a system – so it’s unclear why Xcel Energy felt the need to accelerate the incentive reductions and ignore their own previous road map to the detriment of the local solar industry.

Xcel Energy’s actions threaten to reverse the progress that Colorado has made since the Solar*Rewards program was launched five years ago as a result of a voter-approved Renewable Energy Standard (RES). Colorado’s RES is one of the best in the country (30% by 2020) and Colorado has been among the top five PV markets in the U.S. for many years. Since its launch in 2006, the Solar*Rewards program helped create over 5,300 local solar jobs at over 400+ companies that have collectively installed more than 70 MW of customer-sited PV systems (see graph below).

If Xcel’s actions are approved by the CPUC, I predict that over 50-75% of these jobs will be lost by the end of this year, causing Colorado to lose valuable solar industry infrastructure that took five years to build.

According to the press release, Xcel Energy predicts that over 59 MW of PV systems will be installed in 2011. Despite the information provided, it’s difficult to discern how much of this is customer-sited and how much is utility-scale. For example, the 59 MW likely contains a single 30+ MW utility-scale PV project in southern Colorado that SunPower and Iberdrola have been contracted to install. Xcel seems to claim that the existing backlog of approved, but not-yet-installed, customer-sited projects totals over 6 MW and that over 10 MW of customer-sited solar will be sold in 2011, but I personally don’t see how that can happen at their proposed incentive levels.

This unilateral move by Xcel Energy is a departure from the expectations of Colorado’s voters, explicit in 2004’s voter-approved ballot initiative, in which they states that the RES and solar incentive program should contribute to building a sustainable solar industry in Colorado. Businesses depend on transparent, stable, long-term policies to make hiring and investment decisions, and this move undermines the previously-established capacity-based tiers that Xcel Energy created and obtained approval for from the CPUC.

With the national and international spotlight that President Obama put on the Colorado solar marketplace in 2008 (when he signed the historic American Recovery and Reinvestment Act at the site of a 100 kW PV system in Denver), this is an embarrassment to our state that might spoil Colorado’s “New Energy Economy” success story. Xcel’s regrettable and surprising act demonstrates the urgent need for a reformed incentive program that will help build a sustainable solar industry, and in Colorado’s case, I strongly believe that this requires that the incentive program be independent from Xcel Energy’s and Black Hills Energy’s control.

The solar industry will be organizing a protest to Xcel Energy’s actions on the steps of the state capital in Denver next Friday, February 25, at 12:00 p.m. Please join us there to express your support. This is not just about Colorado – it’s also about stopping a national precedent from being set by two Colorado utilities that have pulled the plug on a growing solar industry. For more information or to get involved, please contact the Colorado Solar Energy Industries Association (CoSEIA) at www.coseia.org.

32 Comments

Andrew_W:
Thank you for reading and understanding the cost savings for my house. Really.
In my own reading, I have found other solutions to the energy problem. But it is always necessary to see how the solution affects other systems.
Here is one example:
http://www.commondreams.org/headline/2011/02/25-1

Solar has a high, initial cost, just like the Federal Interstate highway system and the benefits are long term not short term.
In the state of Arizona, there is a tremendous strain on the energy systems of SRP and APS in the summer months.
Solar can relieve that strain.
The same cannot be said for the state of NY and others.
Energy policies should be different for each state and region.

In some cases these small installations - with huge subsidies, might payoff, but not a solution to our need for clean, affordable electricity. In that endeavor Solar is over-priced and under-performing.

Andrew, please consider the true cost of fossil fuels before stating that solar energy is not cost effective. The term "affordable" is misleading. Some of the costs we currently pay for energy are hidden in our taxes so we have a tendencey to ignore them. There are a number of studies and articles on the web you can read that detail these hidden costs. Here are some starting points for you to read.

Andrew, as much as you may think there is solar-cheerleading going on here, what you are really seeing is people that know something about and believe in renewable energy.
I sell and install solar PV and Thernal systems in Colorado. I meet with people almost daily that have the same concerns you do about believing that solar is too expensive. Once they look over the systems cost and compare it to their utility costs, they learn that solar is cheaper than their utility and they get to help the environment as well.
We had been offering a solar PV lease targeted at retired folks, those with fixed incomes and/or no tax exposure (including non-profts entities & Churches). Their lease payments start at about 10% less than their current utility bill and that margin increases with every rate increase from the utility company. The economics is clearly there.
Xcel Energy killing the rebates has taken away their opportunity to save money on their utility costs.

Andrew_W, based on your comments Xcel isn't "affordable" either. They are currently charging 11.3c/watt. Also, once a Solar array is installed, assuming the ability to put a large enough system on your home/business, the cost is ZERO/watt. Therefore, the initial cost may be more than your definition of "affordable", but the reality is that long-term you actually MAKE money. Much like an investment in a 401k or IRA, but you're guaranteed to get your money back.

Do you really believe that our GOVERNMENT (any government entity) whats to upset the "status quo" of "power as we know it".? Come on get a grip! They want RE to NOT be "affordable" so they can justify the MILLIONS to keep funding NREL, DOE, etc. to find the "silver bullet" when that is clearly NOT needed IMO. Take all the millions and allow people to purchase with low interest rate loans an RE system of there choice!

The battle continues. Renewable energy (distributed on site energy vs the central power metered energy world. Who will win?

Oh and could you back up your claim with somewhere one can read this? And what is the definition of "affordable"? Many cannot "afford" the homes they live in but they sure pay the mortgage every month! So what is "affordable" to one person may not be to the other so "affordable is a very poor choice of words to define the "economics" of something.

I see that your answer to "pull together" to save your company as well as others. Good luck as I believe you will be laying off some people because PV sales won't be what they where. You had a great run! PV is not dead by any means, just means growth will be slower, maybe. I predict that the PUC will reduce the rebate to $1.00 and you know as well as I do its not going to be reduced to $.25. Haven't you caught onto there game?

What most people don't realize is that the solar rewards program DOES NOT COST Xcel a penny and is paid for by the RATE payers and has been increased from the original 1% to now 2% cap in HB 1001. So all the Xcel rate payers are paying for someone else s PV system. How fair is that?? This program came about by a referendum passed by CO voters in 2004 and since its passage as be canalized by further legislation!

And yes you did forget something besides joining RE organizations. While solar electric is great, solar thermal produces far more energy PER SQUARE FOOT than a PV system. My 80 square foot of flat plat panels on my roof produce about 8 kW and NO PV panel comes even close to producing that type of power and generally peoples heating bills far exceed there electric bills. Sometimes I think the RE world is ass backwards! So you may want to take a closer look at solar thermal.

msstory well said about the FACTS of a PV system ( or any RE system) and yes I am quite sure "Andrew W" can't see the obvious about an RE systems. His financial loss. The trouble most people have is the "up front " cost but after you get over that hurdle its all down hill.

Amazing how people in general have NO problem buying a $30,000 vehicle or a $200,000 house at the bat of an eye yet and those actions always INCREASE ones debt load NOT decrease it as does ANY renewable energy system that would purchase.

If the banks where to lend money for RE systems the way they lend money for other items in our society the RE business would be booming! Go figure!

BTW, did my own post on this issue on my web site, SolarChargedDriving.Com, for anyone who's interested. http://solarchargeddriving.com/editors-blog/on-sun-a-fossil-fuels/620-colorado-solar-fight-has-global-repercussions.html

Blake,
Thank you for this well-written post. I will be at the protest on Friday -- and ignoring, again, the anti-solar rhetoric of Andrew_W, which I'm glad to see others in the comment string are also ignoring. Andrew, you're such a broken record...

Remarkably Blake and other cheerleaders suggest "protest." How does that make solar affordable? We didn't tax typewriters to finance computers. We need a R+D and an energy breakthrough technology, not childish protests.

We NEED "clean, affordable electricity." We haven't found it yet, keep looking.

ANONYMOUS
February 22, 2011

It must be nice to be a monopoly with the ability to pay politicians and lobbyists as much as necessary to push shareholder addenda, and simply pass the bill to Colorado electric customers! Xcel CEO Richard Kelly doubled his pay to over $11 million in 2009, he is obviously being rewarded for his actions! Any guesses on the amount his 2011 compensation will be increased after putting an end to Colorado's Solar industry?

The responses to this article are interesting to say the least. I'm really curious to hear one single valid argument against solar energy; be it from a cost/ROI perspective or otherwise.

Fact: Utility is a business

Fact: The minimum lifespan of any solar system is 25yrs, less expensive and more efficient by the day.

Fact: After RE pays for itself, it's free. Or at least it lowers your overall utility bill if it doesn't produce more than you use.

All of this has been stated a zillion times as everyone knows but the real and only issue with RE (and any other product or service 'for sale' on the planet) is if one can afford it "Right Now".

Last Fact: As paying consumers of energy, we can't afford Not to invest in RE. And to the tard "Andrew_w", I take it you are employed by a utility company or something? Doesn't matter...the old saying goes for him: "Better to sit there and just look like a fool, than to open your mouth and remove all doubt".

I also wanted add some more thoughts about Xcel's and Balck Hills' responses about cost to ratepayers. This is an excerpt from a follow-up article I'm writing for local media:

"Some have claimed that the cost of the Solar*Rewards program is too expensive. To the contrary, existing law caps the impact on ratepayers to a 2% increase on their electricity bills. This amount is small relative to the double-digit cost increases that fossil fuels have experienced (Xcel's rates have gone up over 20% in the last six years) and will likely continue to experience in the long-term (Xcel's rates are expected to increase another 21% in the next six years). Despite the 2% rate impact cap, Xcel Energy has been spending more than this amount in the short-term – acting as a "lender" to provide the capital required to keep the program going, all while making a guaranteed rate of return on the outstanding "loan" balance. Should this alarm us? No, because the program was designed to allow for this, much in the same way that Xcel provides the capital to build new coal-fired power plants and then charges ratepayers a percentage of the cost over the course of 20+ years, also while making a rate return. Indeed, this is the main way that Xcel Energy makes its profit, so why should the construction of solar projects be any different?"

Short-term:
1) Attend the protest at the state capitol in Denver on 2/25 at noon - and help get the word out to as many folks as possible;
2) CoSEIA and the Solar Alliance just submitted great comments to the CPUC, but it would be great if individuals submitted their own comments online: http://www.dora.state.co.us/puc/consumer/ConsumerComment.htm

Medium-term:
1) Join CoSEIA (www.coseia.org) to lend your support for the CO PV industry;
2) Follow the PUC proceedings (docket number 11A-135E) as this will certainly require a sustained effort on our part

Long-term:
1) Yes, we need new legislation that addresses all of these issues....stay tuned;
2) Wherever you are, advocate for third-party adminstration of RE incentive programs that are transparent, long-term, and stable while still providing a road map for incentive reductions over time.

Oh my friend. Renewable Energy is the LEAST expansive energy when you consider the collectors can and do last a life time (40+ years)therefore giving you that energy for free long after the system is paid for. Compare a lifetime of utility bills with the lifetime cost of any RE system. RE wins EVERY TIME.

You do solar NOT because of "economics" (but that comes with it because it WILL pay for itself unlike paying a utility bill all your life - paying a utility bill is no different than renting something your whole life. You are paying them for their SERVICE" but because it sets you FREE from the monopolies themselves. They will catch on eventually to RE.

No more R& D is needed. I take HOT showers daily from my solar hot water system and get free electricity from my PV array. What do you get for free? I bet you do not get any of your energy for free if you don't have a renewable energy system.

Solar energy is a very broad field of energy sources. Solar energy is solar electricity, solar hot water, wind energy etc. It is here to stay and contrary to what you believe its not going away.

Its not just about "economics" but that is what many want us to believe! There is NO "payback" in a utility bill. Now or ever. You can't "payback" a service.

Well said, on par with my thoughts as well. You can't blame Xcel for their actions as it is just business for them, however, you hit the nail on the head with respect to taking the program out of their control. It's a wonder how they ever managed to assume control of program that is so directly competitive with their existing business model.

Your "rally" won't change a thing IMO. The rebate amount WILL be reduced as the CPUC has no other choice but to reduce it as your yourself state that PV modules have gone down 50%! Also HB 10-1001 gives the utility the right to change the REC amount anytime they want as well! Section 3 - C (III).

ALL RE companies need to get a copy and read what is in store for Colorado's RE future. Its on its way to be geared to utilities being in charge and the small RE company be dammed! Man those paid lobbyists are doing one heck of a job!

Blake, Blake WAKE up! There are several reasons Xcel did what they did. 1st BECAUSE they COULD after passage of Colorado HB 10-1001 last year. Section 2 (1.5) states: "The amount of The standard rebate offer shall be two dollars per watt; except that the commission may set the rebate at a lower amount if the commission determines, based upon a qualifying retail utilities renewable resource plan or application that market changes support the change" That opened the door for what happened. Simple enough. They where given the chance and they took it. Legislation governs this whole RE thing in Colorado and Xcel plays by the "rules". I saw that coming and told my colleagues it would happen.

Secondly for EVERY PV array that goes up (as well as solar thermal which takes away natural gas revenue from Xcel) ALL ON SITE RE systems have ONE thing in common. They all take away REVENUE from the all utilities, not just Xcel as we know them today no matter what size of shape they come in (IOU, CO OPS etc).

So at the end of the day Xcel absolutely HATES renewable energy companies like yours and mine (BeUtilityFree, Inc.).

Also that new bill gave all utilities in the state of Colorado to do one other thing - TO DEVELOP AND OWN UP TO 50% of the DG capacity it requires from PPA's. So we will see a shift towards utilities owning more and more LARGE RE systems. The more projects they own the less revenue they will lose. Again simple.

The future is ON SITE RE but they can't see that because their mindset is to build a central power plant, METER the output and can't imagine any other way of making and SELLING electricity to the end user. The day will come when utilities will own roof top PV collectors only to METER the FREE energy. And the sad thing is that we will allow that to happen.

Thank you for the update on this issue. Xcel Energy's Solar*Rewards program is active in Minnesota, so now that I know what they are doing in CO, I better get a move on to make sure they don't do the same here.

Chris_Williams - When you say WISCONSIN, you've said it all! On Wisconsin.

Thanks Blake for this great summary. I could not agree more. It is clearly time to get the fox out of the hen house by getting Xcel Energy out of solar. They fought Amendment 37 tooth and nail until it passed and the next day, voila! Solar Rewards brought to you by Xcel Energy! They are fundamentally opposed to the success of the solar industry and it is our own fault for handing over the reins of the administration of the rebate program to them.

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Blake Jones is the President of Namaste Solar, a 100% employee-owned solar electric company based in Colorado. He began his career in 1996 working as a civil engineer for Halliburton in the oil and gas industry. He then spent three years...